Jobs Review

by Larry Levin


Monday was an incredibly slow day. The market was up again, despite amazingly low volume and Friday's horrible jobs data. Why is that poor employment report being ignored? The answer: The Federal Reserve. Specifically, the market is expecting the Fed to announce another round of money printing, which is called "quantitative easing," (QE)Tuesday afternoon at 1:15pm central. The last round of QE didn't do a thing, nor did president Bush's tax cut stimulus, but put the country into deeper debt. Somehow, however, "this time" it will work?

In the meantime, let's take a look at a recap of Friday's report from analyst Dave Rosenberg.

From Breakfast with Rosie:

* Forget about private payrolls, which for some reason the markets have been brainwashed into watching (though these did come in well below market expectations, at +71k versus +90k expected) — we should be adding in state/local government employment. Bottom line is that when adjusting for the Census worker effect, the economy only generated 12k net new jobs last month. Pathetic.
* The Birth-Death adjustment factor tacked in 16k jobs to the seasonally adjusted data, so actually, that 12k number was probably more like -4k. Doubly pathetic.
* The Household survey showed a 159k loss, which was the third decline in a row — something that in the past occurred outside of recessions a mere 2% of the time. Full-time employment tanked 570k (on top of a 70k falloff in June) which was the steepest decline since the depths of economic and market despair in March 2009.
* The Household Survey, on a population and payroll concept adjusted basis, posted a decline of 315k and this followed a 363k loss the month before.
* If not for the near one million decline in the labour force since April — the number of discouraged workers has ballooned 50% in the past year — the unemployment rate would be sitting at 10.4% right now (if the participation rate was unchanged from April’s level).
* As a sign of how far the economy has slowed from its springtime peak, the employment/population ratio dipped from 58.8% in April to 58.7% in May, to 58.5% in June, to 58.4% in July — the lowest it has been since the turn of the year. Moreover, two-thirds of the private sector job creation this year took place in March and April, when the economy was hitting its peak.
* We had mentioned that one of the bright spots in the data was the pickup on factory payrolls, but again this was more the result of seasonal adjustment wizardry than anything else. Somehow, a 16k drop in the automotive industry in the raw data managed to swing to a +21k print on a seasonally adjusted basis and this likely reflected the one-off lack of plant idling this year at GM.
* The workweek did edge up, but it is still an anaemic 34.2 hours and this reflects the ability of businesses to adapt their labour force needs more than anything else. The fact that they chose this route rather than add bodies, and shedding full-time workers, is a sign that companies lack a commitment right now. The fact that they cut their reliance on the temp agency market for the first time in 10 months is another indication that the aggregate demand for labour contracted last month.
* At the rate the economy is creating jobs — 654,000 so far this year — we will not get back to the previous peak in employment until 2017. Just to get back to the 8% unemployment rate that the White House had forecasted we would require job creation of at least 2.5 million. At the rate we are going, that will take longer than two years to accomplish.
* Let’s not lose sight of the fact that initial jobless claims kicked off the month of August by jumping 19k, to 479k, the highest level since last August. If we see this number back up to over 500k, then for sure we will see less denial over double-dip risks.

Source: Gluskin Sheff



Previous Day's Trading Room Results:

Trade Date: 8/9/10

E-Mini S&P Trades*
(before fees and commissions):


1) VA buy @ 8:45am at 1119.50 = +1.00 (1 lot)

2) Algorithm positions (8)

3) “Reading the Tape” positions (0) combined Secret’s, Algo, & “Reading the Tape” total… -0.50



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